Paladin Energy Ltd

TSX : PDN
ASX : PDN


Paladin Energy Ltd

November 12, 2012 07:00 ET

Paladin Energy: Financial Report for Three Months Ended 30 September 2012

PERTH, WESTERN AUSTRALIA--(Marketwire - Nov. 12, 2012) - Paladin Energy Ltd ("Paladin" or "the Company") (TSX:PDN)( ASX:PDN) announces the release of its consolidated Financial Report for the three months ended 30 September 2012. The Financial Report is appended to this News Release.

Highlights

  • Continued solid production for the quarter of 1.929Mlb U3O8, in line with expectations considering 16 days maintenance shutdown at Kayelekera Mine.

  • C1 cost of production continues to fall. Langer Heinrich Mine C1 cost of production decreased from US$32.2/lb in the June 2012 quarter to US$31.8/lb in the September quarter 2012 and Kayelekera Mine C1 cost of production decreased from US$52.2/lb in the June 2012 quarter to US$49.0/lb in the September quarter 2012, including US$45.0/lb for the month of September.

  • Average realised sales price of US$50/lb U3O8 for the quarter, compared to average UxC price of US$49lb.

  • Both mines now operating at nameplate performance and are entering period of optimisation, which will lead to improved recoveries and reduced unit operating costs.

  • Cash position strengthened from US$112.1M at 30 June 2012 to US$144.3M at 30 September 2012 as a result of an increase in receipts from customers and the receipt of the first tranche of the off-take agreement funds of US$50M from Électricité de France S.A.

  • New mid-term sales contracts were secured for a total of 6.3Mlb U3O8, to be delivered from late 2012 to end of 2015 at market prices, with a fixed price component well above the current spot price.

  • Discussions are continuing with potential partners with the aim of further unlocking value through strategic initiatives utilising the Company's extensive uranium data base.

  • Queensland Government announced that it will convene an implementation committee to oversee allowing the recommencement of uranium mining in Queensland
Results
(References below to 2012 and 2011 refer to the equivalent quarter ended 30 September 2012 and 2011 respectively).
  • Safety and Sustainability:

    • Continued high safety performance with a 12-month moving average Lost Time Injury Frequency Rate of 1.0.

  • Production:

    • Combined production for the quarter of 1.929Mlb U3O8 - an increase of 55% from 2011, despite operations being affected by a 16-day planned annual maintenance shutdown at Kayelekera Mine.

    • In the September 2012 quarter, both mining projects operated exceptionally well with production in excess of 97% of nameplate when excluding the Kayelekera plant maintenance shutdown period.

  • Langer Heinrich Mine:

    • Production up by 52% to 1.290Mlb U3O8 in September 2012 quarter from 0.849Mlb U3O8 in September 2011 quarter.

    • Production 99.2% of Stage 3 nameplate, but importantly, at feed grades of 754ppm U3O8, 5.8% below design of 800ppm and 10.2% below June 2012 quarter feed grade of 840ppm. Project has demonstrated the ability to produce at nameplate with feed grades well below design.

    • Record recovery of 86.8%.

    • October month production a record 486,753lb, over 12% above nameplate.

  • Kayelekera Mine:

    • Production up by 61% to 0.639Mlb U3O8 in September 2012 quarter from 0.396Mlb U3O8 in September 2011 quarter.

    • Production down on the June 2012 quarter but in line with expectation considering the successful plant maintenance shutdown which reduced plant availability for the quarter by 18% or approximately 135,000lb U3O8 equivalent.

    • On an available operating day basis, the plant achieved 94% of nameplate. October month achieved 95% of nameplate.

    • Acid plant production substantially increased as a result of upgrades during the shutdown with positive cost implications.

    • Benefits of process optimisation being realised.

  • Sales:

    • Sales revenue decreased 41% from US$102.7M in 2011 to US$61.0M for the quarter ended September 2012, mainly as a result of lower sales volumes. The average realised uranium price for the quarter was US$50/lb U3O8 (2011: US$51/lb). The average UxC spot price for the quarter was US$49/lb.

    • Total sales volume for the September 2012 quarter of 1.224Mlb U3O8 - a 39% decrease on the September 2011 quarter sales of 2.002Mlb U3O8.

    • December 2012 quarter sales are expected to be approximately 2.7Mlb.

    • Uranium sales volumes are expected to fluctuate quarter-on-quarter due to the uneven timing of contractual commitments and resultant scheduling by customers. Now that production has reached design levels, sales and production volumes are expected to be comparable on an annualised basis.

  • C1 Cost of Production:

    • Langer Heinrich Mine C1 cost of production for the quarter decreased to US$31.8/lb U3O8 from US$34.2/lb U3O8 in 2011, mainly due to the cost benefits of the increased Stage 3 production.

    • Kayelekera Mine C1 cost of production for the quarter decreased to US$49.0/lb from US$52.8/lb in 2011 despite the plant shutdown in August 2012. The C1 cost of production for the month of September was US$45.0/lb and remained at this level in October. This is evidence that the cost benefits from the cost optimisation programme at Kayelekera are being realised. Cost optimisation continues to be a key focus, with specific target areas including mining, acid, reagents, diesel, transport and staff rationalisation. Major benefits from these costs reductions are expected over the next 18 months.

      (1) C1 Cost of production = cost of production excluding product distribution costs, sales royalties and depreciation and amortisation. C1 cost is a widely used 'industry standard' term.
  • Cost Optimisation:

    • Following both operations reaching nameplate performance, the sites are now entering a period of optimisation, which will lead to improved process recoveries and reduced unit operating costs. Some elements of this work have potential to expand the reserve base for both projects by being able to use lower ROM feed grades.

    • Post quarter end, the Company announced that it expects to realise total savings of US$60M to US$80M during FY2013 and FY2014. The Company has undertaken a comprehensive cost and production optimisation review as part of the process of moving from development to a sustained production phase. Focus on improving operational efficiency will be an ongoing objective with substantial gains expected over the next 2 years. The cost review encompassed examination of all activities within the Paladin Group from its mining operations, corporate/administration overheads, future development considerations, exploration, sales and business development, some of which is still ongoing. Opportunity for re-negotiation of key mining and consumables contracts has arisen, paving the way for material cost reductions over the next 2 years. The Company is targeting a 7.5% reduction in unit cash costs for the remainder of FY2013 at both Langer Heinrich and Kayelekera and for FY2014 is targeting a further 7.5% reduction in unit cash costs at Langer Heinrich and 15% at Kayelekera.

  • Profit and Loss:

Three Months Ended
30 September
2012 2011
US$M US$M
Revenue 61.3 103.0
Costs before depreciation and amortisation (53.0 ) (79.7 )
Impairment loss in prior year relating to inventory sold during the year 10.4 10.0
Impairment - inventory (2.6 ) -
Royalties and distribution (3.7 ) (6.1 )
Depreciation and amortisation (10.0 ) (17.2 )
Gross profit 2.4 10.0
Exploration expenses (0.5 ) (0.8 )
Site non-production costs (3.5 ) (5.4 )
Corporate, marketing and administration (4.9 ) (6.0 )
(6.5 ) (2.2 )
Non-cash costs (2.1 ) (2.5 )
Other income & expenses (43.8 ) (185.8 )
Loss before interest and tax (52.4 ) (190.5 )
Finance costs (17.0 ) (13.8 )
Loss before income tax (69.4 ) (204.3 )
Income tax benefit 18.2 61.3
Loss after tax (51.2 ) (143.0 )
Non-controlling interests 5.3 19.6
Net loss after tax attributable to members of the parent (45.9 ) (123.4 )
  • Gross profit for the year decreased to US$2.4M from US$10.0M in 2011 due to lower sales volumes and a US$2.6M impairment of inventories at the Kayelekera Mine (2011: US$Nil).

  • Site non-production costs for the quarter were reduced by US$1.9M to US$3.5M due mainly to a decrease in expenditure relating to the Stage 4 expansion evaluation study, which is nearing finalisation.

  • Corporate and marketing costs were US$1.1M lower for the quarter due to cost savings achieved through the cost rationalisation programme announced to the market in the latter half of 2011. Tighter control has led to a reduction in corporate overheads.

  • Non-cash costs, mainly share-based payments, were reduced from US$2.5M to US$2.1M as a result of a reduction in share rights granted compared to 2011.

  • Other income and expenses mainly reflect the impairment of the Kayelekera Mine asset expense of US$41.1M pre-tax, (US$31.0M post-tax) (2011: US$178.9M pre-tax, US$132.1M post-tax) caused by the deterioration of uranium prices. Additionally other expenses include the write-off of fixed costs during the plant shutdown of US$2.3M (2011: US$7.9M).

  • Net loss after tax of US$45.9M was recorded for the three months, mainly as a result of the US$31.0M (post-tax) impairment associated with the write down of the Kayelekera Mine assets.

  • Cash Flow:

    • Positive cashflow from operating activities of US$54.8M primarily due to receipts from customers of US$105.9M and receipt of the first tranche of the off-take agreement funds of US$50.0M. Positive cash flow of US$7.5M generated by the Langer Heinrich and Kayelekera mine operations before investment in working capital required to support higher production levels, payments for administration, marketing and non-production costs of US$8.9M. The remaining expenditure was US$0.5M for exploration and net interest paid of US$4.2M.

    • Cash outflow from investing activities was US$12.7M relating mainly to plant and equipment acquisitions of US$7.4M, predominantly the new tailings facility at LHM and capitalised exploration expenditure of US$5.3M.

    • Cash outflow from financing activities of US$10.4M is mainly attributable to repayment of project financing for KM of US$10.0M.

  • Cash Position:

    • Cash of US$144.3M at 30 September 2012.

  • Long-term Off-take Contract with a US$200M prepayment:

    • US$50M first tranche payment received pursuant to the Long Term Off-take Contract with Électricité de France S.A. with the balance of US$150M due to be received by 31 January 2013.

  • Mid-term Sales Contracts Secured:

    • Two mid-term off-take agreements secured for a total of 6.3Mlb U3O8 to be delivered from late 2012 to end of 2015 at approximately 2Mlb pa from mining operations at LHM and KM. Pricing will be determined predominately by the market price at the time of delivery (without floor or ceiling limitations), while a minority portion of the delivery prices will be in accordance with a series of specified fixed prices which exceed current spot uranium prices.

  • Exploration and Development:

    • Aurora - Michelin Uranium Project, Canada - Drilling started at Michelin in late August. Two diamond core rigs are now operating on site and it is anticipated that drilling will cease in November. An updated mineral resource estimate for the Michelin deposit is expected in 2013 after all assays have been received and validated.

    • Manyingee Project, Australia - Drilling progress is as planned and is anticipated to be completed during November. After the completion and verification of all data and assays, an updated mineral resource estimate is expected in the March quarter of 2013.

The documents comprising the Financial Report for the three months ended 30 September 2012, including the Management Discussion and Analysis, Financial Statements and Certifications are attached and will be filed with the Company's other documents on Sedar (sedar.com) and on the Company's website (paladinenergy.com.au).

To view the First Quarter Financial Report and Certificates, please visit the following link: http://media3.marketwire.com/docs/PDNQ1Report.pdf.

Generally Accepted Accounting Practice

The news release includes non-GAAP performance measures: C1 cost of production, non-cash costs as well as other income and expenses. The Company believes that, in addition to the conventional measures prepared in accordance with GAAP, the Company and certain investors use this information to evaluate the Company's performance and ability to generate cash flow. The additional information provided herein should not be considered in isolation or as a substitute for measures of performance prepared in accordance with GAAP.

Declaration

The information in this Announcement relating to exploration and mineral resources is, except where stated, based on information compiled by David Princep B.Sc who is a Fellow of the AusIMM. Mr Princep has sufficient experience that is relevant to the style of mineralisation and type of deposit under consideration and to the activity that he is undertaking to qualify as a Competent Person as defined in the 2004 Edition of the "Australasian Code for Reporting of Exploration Results, Mineral Resources and Ore Reserves", and as a Qualified Person as defined in NI 43-101. Mr Princep is a full-time employee of Paladin Energy Ltd and consents to the inclusion of this information in the form and context in which it appears.

Conference Call

Conference Call and Investor Update scheduled for 06:30 Perth & Hong Kong, Tuesday 13 November 2012, 18:30 Toronto and 23:30 London, Monday 12 November 2012.

Details of the dial-in were included in a separate news release made on 9 November 2012. Those details remain the same although the date of the call has been brought forward as detailed above.

ABN 061 681 098

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